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Professor, please help me with this query as it was in my mind from past few days.
H Co is parent of S Co. H will show in his financial statement as shares in S Co. Will these shares increase as time passes on because Retained Earning would be increasing. On the date of acquisition, shares in S Co would be XXX (which includes S Co’s Share Capital, Share premium, revaluation surplus and Retaining earnings at acquisition). Will it increase as time passes because retained earning will increase.
No. In H’s own accounts the investment in S will appear at the original cost of the investment and will not change.
In the consolidated statement, the investment in S does not appear and is replaced with the assets and liabilities of S.
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